Pitch Phrase #4: “We don’t have competition”

There are two types of competition: direct and indirect competition in the form of substitutes.

Direct competition would look like this:

Sure, you might not have direct competition. It could be that you’ve found a whole new angle to solving a customer pain point and you’re creating a business or service that doesn’t exist.

However, you will still have substitute competition – someone trying to solve the same problem but from a different angle.

If we take the above example; there might be no other car companies. However, you would be competing like this:

If you claim to not have any competition, you have not done your homework at all.

And if you just claim it to sound cool, you are a bad entrepreneur and the investor won’t invest.

You always have competition and you will definitely start attracting more of it once your startup becomes a hit.

When Apple brought out iPhone, suddenly everyone was doing similar phones.

Success breeds more competition and it’s more important to acknowledge this than to pretend there is no one to take your place.

So, what to say instead?

“We are well protected in the market because of IP/patent/market position/ability to adapt.”

“Our main competitors are X and Y but here’s how we can beat them [your value proposition]”

For example, you might say you’ll be able to beat the competition because you’ve focused on the delivery times or you also allow customers to read reviews, which your research has shown to be a valuable benefit for customers.

Pitch Phrase #5: “We just need 1% of the market”

You might want to say that to showcase your potential.

But you can’t go claiming that if you just carve out a certain percentage of a specific market then you’ll be fine.

It doesn’t really reveal anything.

Consider you are creating a wine app.

Now the total US wine sales were $60 billion in 2016. But you’re not targeting the whole wine industry here – you should be aiming for a niche.

It might be that you’ve identified the online buyers as your market and there you are opting for the organic sector first.

You need to be much clearer in your target and see beyond just a figure you’ve plucked from an industry report.

So, what to say instead?

“This is our market share right now. And we think we can achieve x% of the market by 2020 because we’ve superior defendable value proposition which will make customers switch to our solution. And here’s exactly how we’ll do that. Step 1, step 2, and step 3, etc.”

Pitch Phrase #6: “The conservative predictions are”

This isn’t Sunday school.

You are pitching to top investors and they want to see what you want to achieve.

Conservative rings the wrong bells for two reasons in the ears of the investors.

First, it assumes that you’ve made all the calculations correctly and you know exactly what will happen.

But you don’t. Sure, you need to provide estimates and predictions that are as accurate as possible, but adding conservative to it just doesn’t make it any more credible for the investor.

The second problem is that it makes it all sound like you’re just aiming for the middle ground.

The key is to explain what steps you’re taking in order to ensure the best-case scenario wins. Meaning that you need to show how you are managing risks – whether it’s by rolling out a minimum viable product or having strong IP rights for the products.

Pitch Phrase #7: “We are guaranteed to earn a million in year one”

Two red flags will immediately go up if you utter something like that.

First, nothing in life – and especially in business – is guaranteed.

Startups are essentially about risk no matter how much you like to sugar coat it.

The word guarantee just shouldn’t feature in a pitch. Ever.

The second problem is that you’re not going to make a million in the first year.

OK, so if you are shouting “but I will!” at the screen, I have two questions:

Do you really, really, really have the financial data to back up your claim?

And, what the hell are you doing seeking expensive venture capital when you can get cheaper debt financing if your projections are so accurate?

Seriously, don’t be crazy.

Back your claims and understand there is always risk involved in startup investors.

Investors know it and they are still willing to invest. But not if you are too stupid to understand they are ultimately always taking a risk.

So, what to say instead?

“Based on these metrics/traction, our one-year turnout looks this X, out of which our profit is like this Y.”

When you make predictions like this, you generally want to be highlighting your business model – it can show how you are planning to raise and make money.

Pitch Phrase #8: “We need you to give us X, that’s it”

You don’t want to walk in that you require an X amount of money from the investor and that’s it.

The pitch is not a pegging opportunity. You are not there to argue how much you need the money. The investor knows you need money.

However, the investor wants to hear what they get out of it.

You’re essentially trying to pitch a win-win situation.

The investor gives you X, which allows you to do Y, and this will mean the startup scales and you provide the investor with a hefty return.

It isn’t just about you asking for money and investor getting a return.

Your startup is supposed to help others – employers and consumers.

Never make it like you just need to money and that’s all the investor needs to know.

So, what to say instead?

“We need $500k in order to launch the product on the new market and market it on social media which will help us obtain 120% increase in subscriptions.”

“Beyond capital, we are also looking for an investor to help with our marketing/product development/breaking to a new sector or market.”

Pitch Phrase #9: “We are cheaper thus we offer more value”

Selling cheaper does not mean your product or service is automatically better than the rest.

What you need to do is compare the value to the customer with the price to the customer.

How much value does the customer get for the money they are giving to your startup?

The above doesn’t just miss the point of a low price of somehow relating to the value but also the difference between low selling price and low production price.

Essentially, just because you sell your product cheap it doesn’t mean you’re a low-cost producer.

Startups can often operate lean at the start, which can mean the product or service can be provided cheaper than other companies.

But more often than not, the situation to be lean changes as your business grows.

You’ll start increasing cost because you might have to produce more, you need a bigger warehouse, you must spend more on marketing and so on.

To impress the investor, you need to understand how the profit margin will develop from what it is today and what it will be once the startup scales.

Pitch Phrase #10: “We’ve not hit home with the customers yet but…”

If your customers haven’t loved your product, you need to take a step back on carefully consider whether you are investment ready.

Have you validated your key assumptions of the business model?

If not, you’re wasting your time and you are better of going back to the drawing board.

Besides, you can’t ever accuse your customers ‘not getting it’. If they don’t like the product, it isn’t their fault but there’s something wrong with what’s on offer or how it’s on offer.

You shouldn’t also really admit to saying you have no traction, especially if you’ve been in business for a few months.

Instead, explain why it might be the case – you haven’t had enough marketing done, the product is incomplete – and move on from there.

So, what to say instead?

“With the investment we can launch X which will help us reach Y and gain traction.”

Always show solution orientation rather just admit you have a problem. Sure, there’s a problem but show the investor how you’ll solve it.

Pitch Phrase #11: “All 5 of us are CEOs”

It’s cool that you have equal ownership and decision-making ability with the founders but the problem is that investors aren’t necessarily excited to find out there’s five of you.

Why?

Think about the saying too many cooks in the kitchen and what this essentially means.

If you have five founders with equal ownership and decision-making ability, you will make decision making harder.

Every time there needs to be a decision, you have to find a consensus – between FIVE people!

This is time-consuming and it will eventually lead to situations where you just don’t all agree. Then what?

In the investor’s point of view, this looks complicated and it can jeopardise the startup’s ability to grow and make a profit.

The longer it takes to make decisions, the more harm you might be doing for your business.

You’re essentially just limiting your growth prospects.

If you have more than two founders, you want to ensure that every founder is focusing on different things in an aligned manner.

This is more effective because more things are done and everyone is aware of their particular responsibilities. The startup has a higher chance of succeeding and growing as a result.

So, what to say instead?

“Our team looks like this and I’m the CEO.”

“John here is our CEO, I’m in charge of the product development, Tina has extensive experience in marketing so she has been leading our marketing efforts, and Sally with 10-years worth of experience in accounting will keep an eye on our accounts.”

Pitch Phrase #12: “We can’t see problems ahead of us”

If you can’t see problems ahead of your startup, then you aren’t looking hard enough.